Navigating the Complexities of Multigenerational Wealth Planning

For family offices and those managing significant multigenerational wealth, ensuring the longevity and growth of those assets across multiple generations is a complex endeavor. Between evolving tax laws, economic uncertainties, and changing family dynamics, a comprehensive yet flexible strategy is required.

The Benefits of Private Equity

A key consideration is how to best deploy capital in a way that mitigates risk while still capturing attractive investment opportunities as they arise. Traditionally, many family offices have relied heavily on public markets. However, research shows that private equity can play a valuable role in enhancing portfolio returns while reducing overall volatility.

• Private equity funds have outperformed public markets over the last two decades, generating an annualized internal rate of return (IRR) of 15.5% compared to 8.9% for the S&P 500 from 2000-2021.

• Private equity also tends to be less correlated to public markets, providing diversification benefits.
  

The Small Business Acquisition Opportunity

One area ripe with private equity potential is the small business acquisition space. A flood of businesses will be coming to market over the next 15 years as baby boomer owners retire.

• An estimated 480,000 baby boomer owners will want to retire and sell their businesses each year.

• This saturation, coupled with high interest rates suppressing valuations, creates attractive buying opportunities.
  

This dynamic is a core focus for Legacy Capital Fund. The fund targets acquisitions of web-based technology and transportation/logistics businesses in the $2 million to $25 million valuation range. These sectors were selected for their scalability, high margins, remote operations, and significant growth potential.

"We see a huge opportunity to acquire strong but undervalued small businesses on a massive scale," said Scott Hauck, founder and general partner at Legacy Capital Fund. "Our unique combination of investment acumen, hands-on operational expertise, and best-in-class marketing firepower allows us to quickly unlock untapped value and drive transformative growth."

Navigating Private Equity as a Family Office

Family offices exploring diversification into private equity may be well served looking at niche opportunities like this. Compared to traditional private equity players, smaller funds focusing on neglected sectors can provide differentiated exposure with lower competition for deals.

At the same time, it's critical for family offices to ensure appropriate due diligence, governance, and reporting structures are in place for any private equity investment.

• According to the Global Family Office Report 2022 by Campden Wealth, "Families often underestimate the full demands of private equity investing and get caught by surprise by changing market conditions."

• Carefully vetting fund managers, ensuring full transparency into holdings and valuations, and having flexibility to adapt strategies as situations evolve are essential.
  
  

The Multigenerational Approach

While no single asset class is a panacea, incorporating an allocation to private equity may be prudent for family offices aiming to position their portfolios optimally across generations. With the right manager relationships and robust governance, opportunities like the one presented by baby boomer business owners can enhance long-term returns while mitigating risk.